Call up the reserves

The US’s Strategic Petroleum Reserve (SPR), the world’s largest inventory of crude oil, is at its lowest level since 1983. At a time of heightened geopolitical risk, the US government’s influence over oil prices is waning. Established in 1975 after the Organization of Arab Petroleum Exporting Countries (OAPEC) imposed an oil embargo on western countries for supporting Israel during the Yom Kippur War, the SPR has an authorized capacity of 714 million barrels of oil. In 2022, as a response to Russia’s invasion of Ukraine, roughly 221 million barrels were withdrawn from the stockpile as energy prices shot up and a barrel of West Texas Intermediate reached nearly  USD 130. The time to refill the SPR is probably now, with prices hovering just below the USD 75 mark, a reflection of the weaker global economy and sluggish demand from China. However, the US presidential administration is facing a dilemma: either receive criticism for spending billions of dollars to refill the SPR at a time of record national debt or face opposition party condemnation for endangering national security if they do not.

Source: U.S. Energy Information Administration, January 2024.